“…s. 10 of the FLA provides that questions of title must be settled before the property can be equalized: Korman v. Korman, 2015 ONCA 578, 126 O.R. (3d) 561, at para. 29; Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70, at pp. 90-91.
Questions of title may not always be resolved by simply looking to legal title; even if a party does not hold legal title, they may advance a claim that they hold beneficial ownership in the property through a resulting or constructive trust.
A resulting trust exists when a party makes a financial contribution to the initial purchase of a property, but then gratuitously transfers their title (i.e. transfers their title for nothing in return) to the other party, with the intention that the transferee holds the transferor’s title for the transferor’s benefit. In other words, one party contributes to the purchase of the property but then transfers their interest in the property to the other party for them to hold “in trust” for the transferring party: Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 16-19.
When dealing with a matrimonial home, s. 14 of the FLA creates a presumption of a resulting trust when there has been a gratuitous property transfer from one party to the other: Korman, at paras. 26-27. However, as Cromwell J. has observed, “the presumption of resulting trust … is neither universal nor irrebuttable”: Kerr v. Baranow, at para. 20. Accordingly, when the presumption applies, the party holding the interest may rebut the presumption by showing that the gratuitous transfer was a gift and there was no intention for them to hold the transferred interest for the other party’s benefit.
A constructive trust may arise where there was no financial contribution to the initial purchase of the property or gratuitous transfer of any interest, but where the party holding title to the property would be “unjustly enriched” (i.e. would unfairly benefit) if they were permitted to retain full ownership and benefit over the property. It is premised on the idea that one party contributed a benefit to the property, and it would be unreasonable in law or equity to allow the other party to retain that benefit. Accordingly, a constructive trust is a remedy for unjust enrichment.
As the Supreme Court explained in Kerr v. Baranow, at para. 50: “Where the plaintiff can demonstrate a link or causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property, a share of the property proportionate to the unjust enrichment can be impressed with a constructive trust in his or her favour”.
There is no presumption of a constructive trust in the FLA, therefore, the party making a claim for a constructive trust has the burden to establish that unjust enrichment exists. Only then may a court impose a constructive trust to remedy the unfair benefit.
Kerr v. Baranow, at para. 32, articulates the three elements to an unjust enrichment claim: (1) an enrichment; (2) a deprivation; and (3) the absence of a juristic reason for the enrichment. To obtain a constructive trust as a remedy, the claimant must also demonstrate a “sufficiently substantial and direct” link, “causal connection”, or “nexus” between the party’s contributions and the relevant property, and that a monetary award would be insufficient in the circumstances: at paras. 51-52.”